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Monday, 22 March 2010

Oman’s benchmark stock index rose the most in more than a month after Bank Muscat SAOG and Ahli Bank SAOG distributed dividends. Qatari stocks also gained.

Bank Muscat, the sultanate’s biggest lender, advanced to the highest since November 2008 after paying its dividend yesterday. Ahli Bank, the provider of long-term loans for property construction and home purchases, increased to the highest in 18 months. The Muscat Securities Market 30 Index gained 0.9 percent, the most since Feb. 14, to 6,740.06.

“There was a very handsome payout recently,” said Haissam Arabi, chief executive officer of Dubai-based Gulfmena Alternative Investments. “The trend in Oman is that right after dividends are paid, there’s a movement on the stock, which is what happened this morning. Investors are taking prices back to pre-distribution levels.”

In a high-profile vote of confidence in Dubai, Standard Chartered Bank said on Monday that it was moving its chief executive responsible for all markets except Asia to the emirate.

V Shankar, a Singaporean, is due at the end of April to replace Gareth Bullock, who has overseen the Middle East, Africa, Europe and the Americas from London.

The move is a shot in the arm for Dubai International Financial Centre, an offshore zone in the emirate, where Standard Chartered’s existing operations are based. The DIFC has been rocked by the removal of its former director-general last year while Dubai is suffering a debt crisis and real estate collapse that has impacted the broader economy.

Abu Dhabi government investment body Mubadala Development Company saw revenue nearly double in 2009 on income from key projects and changes in fair value of investments.

Mubadala, one of the few state-controlled investment vehicles to publish results, said on Monday it could repeat its 2009 performance in 2010 after its assets grew to 88.5 billion UAE dirhams ($24.10 billion) end-2009.

Total revenue at the firm, which invests in projects in part to diversify Abu Dhabi's energy-intensive economy, almost doubled to 13.1 billion dirhams in 2009 compared to 6.66 billion dirhams in 2008 while total comprehensive income hit 8.6 billion dirhams.

The Dubai Financial Services Authority (DFSA) yesterday ordered Damas International to replace Ernst and Young as its external auditor.

In addition to replacing the board of directors, including the Abdullah brothers, Damas agreed to “substitute its external auditor with another auditor acceptable to the board and the DFSA”, the regulator said.

Ernst and Young said that its last audit of financial statements for the period ending March 31 2009 “appropriately disclosed all amounts owed by the Abdullah Brothers to the extent that they were outstanding at the balance sheet date”.

The disclosures at Damas International represent a wake-up call for investors in the UAE and underline why standards of corporate governance need a closer look, now more than ever.

Unknown to many shareholders, the dynastic heirs of the business – the three Abdullah brothers – were able to withdraw money from a publicly traded company like it was a personal bank, the regulator said.

They also failed to disclose conflicts of interest on multiple occasions. For instance, they did not disclose to the company that they were the owners of a building in Sharjah that Damas bought for Dh84 million (US$22.8m).

All signals point to an imminent sale of Zain Africa to Bharti this week. Several reports confirm that Bharti’s board met this Saturday and approved of the plan to acquire Zain Africa ahead of the March 25 exclusive talks deadline. Zain’s sell curse and Bharti’s buy curse will finally come to an end. Bharti failed in two previous attempts to acquire Africa’s largest operator MTN. Zain has also failed to sell Zain Africa and itself in the past.

Last week reports suggested complications surfaced in relation to Zain’s Nigeria operations. Econet Wireless Holdings is disputing control of Zain’s unit in Nigeria and it is particularly significant as Nigeria contributes 21% of Zain’s earnings. However, such concerns were assuaged as there are indications Bharti Airtel may simply ask Zain for legal protection from a dispute in Nigeria. Further, Bharti might put part of the purchase price in an escrow account to protect it from potential problems.

Sources even indicate that Bharti Airtel has issued a term sheet to banks to raise up to US$ 8.5 bn in offshore loans to fund the Zain acquisition deal. Bharti is said to have received “strong response” from offshore lenders. According to analysts, the acquisition of Zain Africa would increase Bharti’s debt from 0.4 times EBITDA (earnings before interest, tax, depreciation and amortization) to around 2.5 times. However, this would still be a lower debt multiple that that of its Indian competitor Reliance Telecom.END

Bankers will see Dubai's plans to restructure $26 billion in debt as a kickoff in a long game and not a goal if other high-profile restructurings, such as Russian aluminium producer UC RUSAL are a guide.

Dubai World, the holding company harbouring the emirate's flagship property firm Nakheel, builder of palm-shaped islands, is the playing field for one of the biggest emerging markets debt dramas ever, and an announcement is expected this week.

"We have a long way to go before we have any real clarity on how this restructuring will pan out," a London-based banker specialising in lending to the Middle East said.

The clock is ticking on a proposal to restructure Dubai developer Nakheel's $980 million dirham-denominated Islamic bond maturing May 13 as an indicator of how Dubai will deal with its much larger debts.

FINANCIALS

Nakheel [NAKHD.UL] is one of two property arms of state-owned conglomerate Dubai World [DBWLD.UL], which stunned global markets in November when it asked for a delay in repaying $26 billion in debt. IMF estimates suggest that 80 percent of Nakheel's bondholders are local UAE banks.

Sources told Reuters that repayment is unlikely but all options remain on the table.

As longtime readers of this blog will know I have written extensively on the subject of The Great Damas Heist. I wrote not one but two articles on the damage this did to the DIFC generally. I wrote a few articles on the Heist itself and what I thought was a strange arrangement whereby the brothers basically agreed with themselves how they would go about repaying the money and suffered no regulatory sanction at all. I wrote about how the DFSA needed to be all over these guys and encourage my readers to take action.

Today they did take two actions. The First is an agreement with the Abduallah Brothers and the second is an agreement with the board of Damas itself. I have to go through the documents before I write a longer post but, having taken all involved to task so aggressively, I wanted to give credit where credit was due. It had bothered me deeply that a long night of financial opacity was descending on the DIFC, a place I had worked so long. Now that night has been broken by at least a single star of hope.END

Dubai shares surged to the highest close since January on speculation Dubai World’s restructuring proposal will appease investors and after Saudi Arabia’s benchmark index rose.

Dubai Financial Market PJSC rose 6.3 percent as Al Khaleej reported shares listed on Nasdaq Dubai may trade on the exchange in a few weeks. Emaar Properties PJSC, the United Arab Emirates’ biggest developer, rose for a second day. Emirates NBD PJSC, the country’s largest bank by assets, gained the most in more than a month. The Dubai Financial Market General Index increased 2.8 percent to 1,774.43, the highest level since Jan. 11. The ADX General Index advanced 0.9 percent.

Dubai’s benchmark index has gained 11 percent this month as investors expect satisfactory repayment terms for state-owned holding company Dubai World’s $26 billion of debt. The company will announce a “fair” proposal “very soon,” Sheikh Ahmed Bin Saeed Al Maktoum, chairman of the Dubai Supreme Fiscal Committee, said in an interview last week.

Aabar Investments PJSC, the Abu Dhabi fund that is the biggest shareholder in Daimler AG, put plans to boost its stake in the German carmaker on hold after the shares surged, the company’s chief executive officer said.

“Currently we are not in the process of increasing the stake in Daimler,” Mohamed Badawy al-Husseiny said in an interview in Abu Dhabi yesterday. Daimler’s “share price has moved up, so the question becomes whether there is a big strategic value to increase the stake from 10 to 15 percent,” he said.

Aabar in March last year paid $2.7 billion for a 9.1 percent stake in Stuttgart-based Daimler, the world’s second- biggest luxury carmaker. The shares have surged 59 percent in the past year, while Aabar’s shares are up 29 percent. Aabar’s Chairman Khadem Abdulla al-Qubaisi said in November the government-controlled company may raise the stake to 15 percent.

The Dubai Financial Services Authority on Sunday imposed its most draconian sanctions to date, when it fined the owners of the region’s largest jeweller business for withdrawing cash without authorisation and removed the company’s board.

The DFSA also banned the owners of Damas, the jeweller, from acting as directors of any company in the Dubai International Financial Centre, an offshore zone in the emirate, for up to 10 years.1

The regulator’s investigation showed that the three brothers who control the company – Tawhid, Tawfiq and Tamjid Abdullah – should repay Dh365m ($99m) and 1.9m grams of gold taken from the company for personal use without telling the board of directors or seeking their approval.